Dealer LAB: Net income drops in 2012

Publish Date:

Feb 20, 2013

By Joe Delmont

BILL SHENK and his partner in December wrapped up their second full year of ownership at Destination Powersports in Punta Gorda, Fla., and in doing so posted their second consecutive year of profitable operations.

Unfortunately, net income for the year was less than what it was in 2011.

In 2012, the dealership posted net earnings of $152,131 on total revenues of $5,473,524, down from net income in 2011 of $225,333 on total revenues of $5,195,851. That’s a drop of $73,202, or 32.5 percent.

The biggest factor affecting net income was the huge increase in flooring costs due to reduced support from the OEMs, Shenk says. Flooring costs for the dealership climbed to $105,287 last year, an increase of $70,413, or more than 200 percent from the $34,874 posted in 2011. This increase drops directly to the dealership’s bottom line and would have made net income for the two years just about flat ($225,333 in 2011, compared to $222,544 last year.)

Gross profit for 2012 was $1,307,974, down $34,217, or 2.5 percent, from the $1,342,191 earned in 2011.

While unit sales, F&I and parts posted revenue gains for the year, accessories and service dragged down total revenues.

Unit sales were up substantially, with sales of new and used units topping out at 553 units for the year, up 14 percent from the 485 new and used units sold in 2011.

The big gainer in unit sales last year was the ATV/SxS segment, which sold 81 new units compared to 53 in 2011. Used units were off a bit last year, dropping from 12 to nine. In 2012, the dealership sold 17 more new ATVs and 11 more new SxS units than it did in the previous year. The big boost came from adding Polaris in the early summer of 2012.

Sales of new motorcycles were about flat: 139 in 2012 vs. 140 in 2011, but used bike sales improved, climbing from 154 in 2011 to 169 in 2012. “We already dominate our marketplace with new-unit penetration. Unless the new-unit market potential increases, we are capped. Used units were our growth opportunity in 2012 and it looks to be that way again in 2013,” Shenk said. “Flooring capital and finding used inventory was our limiting factor. We were able get more inventory in 2012. When we buy more, we sell more. (Continued)